Westport: Likely Beneficiary Of A Potential Quadrupling Of US Natural Gas Vehicles Sales by 2016

by Clean Energy Intel

Companies with significant exposure to the market for natural gas
transportation have obviously received a lot of attention recently
following the announcement last
week of a co-marketing agreement for LNG transportation
between oil major Shell (RDS-A) and Westport (WPRT),
a provider of natural gas engine technology.

This makes the release of Pike's new annual global sales forecasts
for natural gas vehicles particularly timely and worth a
look.

According to Pike
Research, there are currently 12.6 million natrual gas
vehicles (NGVs) in the world. These are mainly located in Latin
America, the Middle East and Africa. Meanwhile, annual sales of NGVs
reached about 1.9 million globally in 2010.

Pike's research suggests that sales will now grow significantly
going forward, reaching 3.2 million by 2016 - a jump of 68%. Most
importantly, Pike believes that the key driving force will be fleet
owners looking to cut down on their petroleum bills. As a percentage
of total global sales, commercial NGVs are expected to rise from 59%
today to 65% by 2016.

For the US, Pike sees sales growing even faster. From a fairly low
base of 8,400 in 2012, sales are expected to quadruple to 33,000
vehicles by 2016. Moreover, some 90% of the NGVs sold in the US in
2016 are expected to be for commercial use. Clearly, this would be a
significant market for a company like Westport.

The market for NGVs in the US is currently limited, particularly in
terms of personal transportation, by the large costs associated with
building natural gas stations. The following numbers from AutoObserver highlight
the issue:

"As of Sept. 1, there were 901 CNG stations and 45 liquefied natural
gas (LNG) stations in the U.S., compared to about 2,600 propane
stations, more than 2,400 E85 stations and almost 3,200 publicly
accessible electric-vehicle charging stations, according to the U.S.
Energy Department's Alternative Fuels and Advanced Vehicles Data
Center (AFDC).
There are about 125,000 conventional gas stations in the U.S".

However, the task of providing an LNG station network for commercial
trucking fleets is not quite so onerous since it can be effectively
focused on the main trucking corridors. This provides Pike with more
optimism on their commercial NGV forecasts for the US.

All of this is certainly supportive for Westport of course. And this
is particularly true in the light of the company's recent agreement
with Shell. You can read a fuller discussion and assessment of the
implications of this agreement here,
with a further update here.

Disclosure: I have no positions in
the stocks discussed.

About the Author: Clean Energy Intel is a free investment advisory service (available
at www.cleanenergyintel.com),
produced by a retired hedge fund strategist who also manages his own
money inside a clean energy investment fund.